Guest Post by David Kurtz, CPA: The rules and choices in determining the lives, methods and placed in service dates of certain rental real estate, such as office buildings, shopping malls and centers and warehouses, are complex and need to be carefully considered because supportable larger depreciation expense deductions can effectively (i) defer federal income taxes of 25% on rental real estate income and (ii) convert up to 35% income tax rate savings into 25% income tax cost on the sale of depreciable rental real estate, which is a permanent tax savings of up to 10% of the depreciation expense deductions.
PICOR Connect | Trends in Commercial Real Estate
Much has been written about the significant joint undertaking by FASB and IFRS to update lease accounting rules in the name of improved transparency. With real estate leases comprising a high percentage of all operating leases, the potential impact for the commercial real estate industry looms large, for landlords, tenants, brokers and property managers alike.
As simple as it seems, this can be a very difficult question, whether you seek Tucson office space or another type of commercial building. Every business is different...yet the factors affecting this decision are pretty constant. A good place to start is a discussion with your attorney and/or CPA to determine which options provides the best tax advantage for your business. Tax deductions, depreciation, appreciation, improvement costs and payments are all treated differently with a lease or a mortgage. Pending rules related to lease accounting are due out this summer and may impact how businesses approach the lease versus buy decision. There are many aspects to this question, and it will require an expert's help.